TMI Tax Updates - e-Newsletter
September 14, 2020

Case Laws in this Newsletter:

GST Income Tax Benami Property Customs Corporate Laws Insolvency & Bankruptcy Service Tax Central Excise Wealth tax

TMI SMS

• Whether Club can be treated as Association of Person u/s 21AA of wealth tax act? - Held No, since the club was not created for tax evasion - SC

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• Once a person is incorporated under the provisions of the Societies Registration Act, it is Not liable to service tax as Club and Association Service - Tri

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Articles

1. ARBITRAL INSTITUTION

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. CCI approves proposed combination involving acquisition of 20% of the issued and paid-up equity share capital of Piramal Pharma Limited (Pharma Co.) by CA Clover Intermediate II Investments (Curie)

2. Customs seizes smuggled textiles worth ₹ 3.3 crore on fishing trawler to Bangladesh

3. Sebi shortlists Bharti Airtel, Wipro, others to revamp IT infra network, communication systems

Notifications

Income Tax

1. 74/2020 - dated 11-9-2020 - IT

Central Government notifies L&T Infra Debt Fund as an infrastructure debt fund for the assessment year 2018-19 and subsequent assessment years

SEZ

2. S.O. 3105(E) - dated 9-9-2020 - SEZ

Central Government de-notifies an area of 0.2509 hectare, thereby making the resultant area as 1682.4031 hectare at Villages Dahej, Ambheta, Luvara, Suva, Lakhigam and Jageshwar in Taluk Vagra, District Bharuch in the State of Gujarat

Highlights / Catch Notes

Income Tax

• Section 13 Violation: Only Benefits to Specified Individuals Taxable at Maximum Marginal Rate, Not Entire Trust Surplus.

  Case-Laws - AT : Exemption u/s 11 - undue benefit in lieu of salary and allowances to the persons specified u/s 13(3) - In the present case, even if it is held that there is violation of sec.13, then only the amount of benefit given to the persons specified u/s 13(3) out of the income of the trust is chargeable to tax at MMR. Hence, the action of AO in taxing the surplus at maximum marginal rate without considering the provisions of section 11 & 12 is bad in law. - AT
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• Interest Payments to Nominal, Associate, and Sympathizer Members Exempt from TDS u/s 194A(3)(v) of Income Tax Act.

  Case-Laws - AT : TDS u/s 194A - Disallowance u/s.40(a)(ia) - non-deduction of tax at source on interest paid to some of the members, which were held to be not legal members - whether nominal members, associate members and sympathizer members were also covered by the exemption under section 194A(3)(v)? - HELD Yes - AT
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• Trust Classified as Revocable u/ss 61-63, Not an AOP; Identified as Determinate with Defined Beneficiaries.

  Case-Laws - AT : Status of a trust/AOP - Valid status - assessee trust is a revocable trust - provisions of Sec. 61 to 63 of the Act would be applicable to it - there would be no legal sanction to treat the trust as an AOP - the assessee trust is a determinate trust i.e a non-discretionary trust. - AT
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• Regular and Block Assessments Can Occur Simultaneously; Additions u/s 68 Upheld Despite Block Assessment Claims.

  Case-Laws - AT : Assessment u/s 147 - Additions u/s 68 - The regular assessment and block assessment are both separate proceedings and even can run parallel - assessee has failed to substantiate that relevant accommodation entry transactions - we reject the contention of Learned Counsel of the assessee seeking telescoping of the addition with the income already assessed in the block assessment order. - AT
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• Penalties u/ss 271D and 271E deleted due to genuine cash transactions and reasonable cause u/s 273B.

  Case-Laws - AT : Penalty u/s 271D and 271E - violation of provision of section 269SS and 269T - Loan or deposits in Cash - Belief on the part of the assessee in view of the past history of the case that deposit/repayment by its members in cash is bonafide belief - Considering the bonafide and genuine transaction, reasonable cause in terms of section 273B of the Act, exist in the case of the assessee - Penalty deleted - AT
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Customs

• Section 112(a) Penalty Imposed on CHA Employee Without Proper Consideration or Evidence of Wrongdoing.

  Case-Laws - AT : Levy of Penalty u/s 112 (a) of the Customs Act on the employees of CHA - The appellant was working as per the instructions given to him by his senior. There is no case made out of any abnormal gain by the appellant to indicate any collusion or abetment on his part with the importer of the consignment under dispute - Penalty has been imposed mechanically without application of mind - AT
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• High Court Affirms Provisional Release of Imported Car u/s 110-A, Regardless of Appeal Status or Car Condition.

  Case-Laws - HC : Provisional release of car imported - whether the imported vehicle is a brand new one or it is a second hand model - When the statute itself provides for provisional release of seized goods, merely on the ground that the good in question is a prohibited one or that the aggrieved person has filed appeal before the CESTAT cannot be the reason not to exercise the statutory discretion conferred by section 110-A. - HC
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Corporate Law

• Court Intervenes u/s 97 to Enforce Annual General Meeting Compliance Per Companies Act 2013 for Corporate Governance.

  Case-Laws - Tri : Non-conduct of Annual General Meeting - In view of the mandatory requirement under the provisions of the Companies Act, 2013 and in view of the paramount interest of the company, as also the submissions made on behalf of both sides, we consider that this is a fit case of exercising the powers conferred under Section 97 of the Companies Act, 2013 - Tri
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• Company Meets Section 131 & Rule 77 Criteria to Revise Financial Statements, No Revenue Impact on Tax Computation.

  Case-Laws - Tri : Voluntary revision of financial statements - Income Recognition - NPA - Section 131 of the Companies Act, 2013 - The petitioner-company fulfilled the requirements under Section 131 of the Act and Rule 77 of the 2016 Rules and accordingly, the petitioner-company is entitled for seeking revision of its financial statements or board’s report, for the financial years, in question - it is seen that the relevant interest amounts for the particular years, being treated as accrued and not paid, is added back in computation to arrive at the assessable income. Thus there is no impact on revenue from the perspective of the Income Tax Department. - Tri
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• Court Orders Restoration of Company's Name in Register; Removal Deemed Too Severe Without Opportunity to Rectify.

  Case-Laws - Tri : Restoration of name of company - The Appellant has been able to satisfy this bench that it has certain assets which necessitate and justify the restoration of its name in the Register of Companies. A step as stringent as what has been taken at least requires an opportunity to the appellant to take remedial measures. Merely to disallow restoration on grounds of its failure to file annual returns would be neither just nor equitable- Tri
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IBC

• Financial creditors can't challenge CoC-approved resolution plans during CIRP before Adjudicating Authority approval u/s 30(2) of IBC.

  Case-Laws - Tri : Approval of Resolution Plan - CIRP process - dissenting financial creditors - No financial creditor either assenting or dissenting can challenge a Resolution Plan, as approved by the CoC, even before the Adjudicating Authority approve the said Plan on the ground that the Plan does not meet the requirements of Section 30 (2) of the Code. Hence, there is no need to examine the rival submissions on this issue at this stage. - Tri
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• Shares Transferred to Trustee Don't Affect Financial Creditor Status or Rights Under CIRP Process.

  Case-Laws - AT : Initiation of CIRP - It is true that after invocation of the pledge, Shares were transferred in dematerialised form in the DP Account of SBI CAP Trustee Company Ltd. and it became the beneficial owner of the shares it does not mean that the Financial Creditor became the beneficial owner of the shares and it losses the status of Financial Creditor. - AT
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Wealth-tax

• Supreme Court Rules: Clubs Not Automatically "Associations of Persons" for Wealth Tax Despite Income Tax Classification.

  Case-Laws - SC : Wealth Tax Liability - Whether Club can be treated as "Association of Person"? - Charging provisions under the Income Tax versus under the Wealth Tax - This argument of the Revenue rejected, that being taxed as an association of persons under the Income Tax Act, the Bangalore Club must be regarded to be an ‘association of persons’ for the purpose of a tax evasion provision in the Wealth Tax Act as opposed to a charging provision in the Income Tax Act. - SC
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• Bangalore Club Ruled as "Association of Persons" for Wealth Tax; Section 21AA Not Applicable to Case Circumstances.

  Case-Laws - SC : Wealth Tax Liability - Whether Club can be treated as "Association of Person"? - Section 21AA has been introduced in order to prevent tax evasion - The Bangalore Club is an association of persons and not the creation, by a person who is otherwise assessable, of one among a large number of associations of persons without defining the shares of the members so as to escape tax liability. - It is clear that Section 21AA of the Wealth Tax Act does not get attracted to the facts of the present case. - SC
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Service Tax

• Incorporated Entities Excluded from 'Club or Association' Definition u/ss 65(25a) and 65(25aa), No Service Tax Liability.

  Case-Laws - AT : Club and Association Service - The ‘club or association’ was earlier defined under section 65(25a) and 65(25aa) to mean ‘any person’ or ‘body or persons’ providing service. The expression ‘body of persons’ cannot be possibly include persons who are incorporated entities, as such entities have been expressly excluded under sections 65(25a)(i) and 65(25aa)(i) as ‘any body established or constituted by or under any law for the time being in force’. - It is not in dispute that in the present case the respondent has been incorporated under the provisions of the Societies Registration Act. - Not liable to service tax - AT
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• Tax Refund Denied: Appellant's Service Tax Claim Rejected Due to Unjust Enrichment Principles in Club or Association Service Case.

  Case-Laws - AT : Refund of Service Tax - Club or Association Service - principles of Unjust Enrichment - The fact that the appellant has passed on the tax element to its service recipient, the refund of which is not made as on date, coupled with the appellant’s claim for refund of “tax” clearly attracts the principles of unjust enrichment and hence cannot be entertained. - AT
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• Export Refunds u/r 5: Clarifying Calculation of Export Turnover in Refund Formula for Accumulated Credit.

  Case-Laws - AT : Refund of accumulated credit - ascertainment of eligible refund under Rule 5 - In both the numerator and denominator, the amount of export turnover have to be considered (i.e. same figure ) when there is no domestic services rendered by the assessee appellant inasmuch as the “value of all other services” would be ‘NIL’ in the given case. There is no reason to consider the aggregate of the value of export turnover payment of which has been received and those for which payment has not been received, since not required in the prescribed formula - AT
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Case Laws:

• GST

• 2020 (9) TMI 468
  Refund of IGST/ITC - case of petitioner is that this Court had directed the respondents to examine the claim of the petitioner and release the refund amount within four weeks positively, if the same or any part whereof was found to be payable - HELD THAT:- Issue Notice. Issue notice to the unserved respondents through counsel by all modes, returnable for 23rd September, 2020.

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• Income Tax

• 2020 (9) TMI 467
  Penalty u/s 271D and 271E - violation of provision of section 269SS and 269T - Bonafide Belief - as submitted that the assessee is in existence for last many years and filing return of income but no such penalty has been levied in the case of the assessee and it is for the first time violation of the section 269SS/269T has been pointed out in the case of the assessee - HELD THAT:- Belief on the part of the assessee in view of the past history of the case that deposit/repayment by its members in cash is bonafide belief. DR has not controverted the factual finding of the Learned Counsel of the assessee that in subsequent years also no penalty has been initiated/levied in the case of the assessee under section 271D/271E. In the case of CIT Vs Lokhpal Film Exchange (Cinema) [ 2007 (1) TMI 165 - RAJASTHAN HIGH COURT] held that the assessee had acted bonafidely and its plea that inter se transaction between the partners and the firm were not governed by the provision of section 269SS/269T, was a reasonable explanation and no penalty could be imposed. Considering the bonafide and genuine transaction, reasonable cause in terms of section 273B of the Act, exist in the case of the assessee for not complying with the provision of section 269SS and 269T and, therefore, we cancel the penalty levied in terms of section 271D and 271E of the Act. - Decided in favour of assessee.

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• 2020 (9) TMI 466
  Assessment u/s 147 - Validity of reopening of assessment - Assessment u/s 153A - whether assessee has failed to substantiate that relevant accommodation entry transactions were already considered in the block assessment proceedings? - HELD THAT:- In the case of the assessee the regular return of income filed was only processed and no regular assessment under section 143(3) of the Act was completed. The block assessment under section 158BC has been completed in respect of the undisclosed income unearthed during the course of the search carried out at the premises of the assessee. Under the block assessment only incriminating material found during the course of the search can be basis for the block assessment and it is distinct from the regular assessment . The Assessing Officer has put the facts that no scrutiny assessment u/s 143(3) of the Act i.e. regular assessment was carried in case of the relevant assessment year. In our considered opinion, there is no incorrectness of the fact on the part of the Assessing Officer - No incorrectness of the facts in the reasons recorded. Borrowed satisfaction of AO - reference of the entries obtained from M/s RK Agrawal and Co. The Assessing Officer has reproduced all the four entries with details of the amount, date of transaction, bank account from which entry was given, instrument number etc. the Assessing Officer has also mentioned that no scrutiny assessment under section 143(3) of the Act was completed in the case of the assessee and therefore no information relating to the transaction was available on record. Assessing Officer has formed his belief on the analysis of credible information received from the Investigation Wing and satisfaction recorded on said information, cannot be said as borrowed satisfaction. We may also like to point out here that the Assessing Officer can issue notice under section 133(6) of the Act during pendency of the assessment proceeding and not authorised to carry out enquiry invoking section 133(6) of the Act prior to recording of reasons and reopening of the assessment. We reject the contention of assessee that Assessing Officer has not applied mind while recording the reasons and he recorded the reasons on the basis of the borrowed satisfaction. Whether no notice under section 148 of the Act can be issue after completion of the block assessment proceedings? - In the instant case, the Assessing Officer has reopened regular assessment and not block assessment. The regular assessment and block assessment are both separate proceedings and even can run parallel. Assessing Officer has noted that the assessee has failed to substantiate that relevant accommodation entry transactions were already considered in the block assessment proceedings. We also reject the contention of the Learned Counsel of the assessee that no notice under 148 of the Act can be issued in the case of the assessee in view of the block assessment completed prior to issue of notice u/s 148 of the Act. Addition u/s 68 - accommodation entries in the block assessment order - HELD THAT:- The onus is on the assessee to discharge the responsibility of substantiating that in case of RK Agrwal and company only commission income was earned. The assessee has neither produced those parties for statement alongwith documentary evidences to support that only commission income was earned. In view of the failure on the part of the assessee to discharge his onus, the addition made by the Assessing Officer is sustained and we reject the contention of Learned Counsel of the assessee seeking telescoping of the addition with the income already assessed in the block assessment order. The ground of the appeal of the assessee is accordingly dismissed.

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• 2020 (9) TMI 465
  Status of a trust/AOP - Valid status - assessee derived income from assets reconstruction activity and handling of non-performing assets of banks/financial institutions - HELD THAT:- As observed by the CIT(A), all the necessary ingredients for the formation and existence of the trust had been fulfilled, and the RBI guidelines had duly been followed by the assessee trust. Interestingly, we find that in case the claim of the A.O that the assessee is not a valid trust and its creation was only a fa ade for evasion of taxes was to be accepted, then it would be imply that the trust does not exist at all. If that be so, then we concur with the CIT(A) that there would be no legal sanction to treat the trust as an AOP, as had been advocated by the A.O. Under such a situation, the only transaction that would subsist will be the direct investment by the beneficiaries in the financial assets, and therefore, the question of assessing the assessee trust as an AOP or under any other head of income would be totally out of question. Accordingly, in the backdrop of our aforesaid observations, we are of the considered view that the CIT(A) had rightly dislodged the aforesaid view of the A.O, and in the totality of the facts had correctly observed that the assessee is a valid trust. Holding the trust as a non-revocable trust - HELD THAT:- No hesitation in observing that the income therein arising has to be brought to tax in the hands of the SR holders, i.e as per the provision of Sec. 61 to 63 of the Act. Insofar, the view taken by the A.O, that as the revocation of the contributions is conditional upon the consent of the contributors holding 75% of the units, we are afraid that the same would not render the contributions as irrevocable. Our aforesaid view is fortified by the judgment in the case of Behramji Sorabji Lalkaka Vs. CIT [1948 (3) TMI 41 - BOMBAY HIGH COURT] . As observed by the Hon ble High Court that the words revocable transfer are well understood in law and a transfer does not cease to be revocable because the power of revocation cannot be exercised by the settlor without the consent of the named individuals or any of them. As observed by the Hon ble High Court, a transfer is nonetheless revocable even if it can be revoked only with the consent of any named person or persons. As such, on the basis of our aforesaid observations we are persuaded to subscribe to the view taken by the CIT(A), who had rightly concluded that the assessee trust is a revocable trust, and thus, the provisions of Sec. 61 to 63 of the Act would be applicable to it. Status of the trust as an AOP - HELD THAT:- Beneficiaries who do not have any control over the activities carried on by the trustee in managing the trust, had made their respective investments based on the offer documents, and on the basis of their investments made in the trust were allotted the SRs which represented their undivided and proportionate interest in the corpus of the trust. We are unable to comprehend as to on what basis the A.O had concluded that the motive behind creation of the trust was the income earning asset reconstruction activity and handling of NPAs. On a perusal of the records, we find that the two beneficiaries viz. (i) ARCIL; and (ii) ICICI Bank Ltd., had made investments based on the offer document separately, and not jointly, on the basis of which they had been allotted the security receipts (SRs) representing their undivided and proportionate interest in the corpus of the trust. In our considered view, as the A.O had failed to place on record any material which would even remotely suggest that there was a concerted effort by the beneficiaries to earn income jointly, therefore his unsubstantiated view that the assessee was to be treated as an AOP cannot be sustained and has rightly been vacated by the CIT(A). Taxability of the Income at the right place and in right hands - HELD THAT:- We are unable to accept the claim of the A.O that as the amounts are first realized/received in the books of the assessee trust, and then passed on to the SR holders, viz. ARCIL and ICICI bank, the same therefore was liable to be assessed as the income of the assessee trust. We concur with the view taken by the CIT(A) that merely because the realization flows through the assessee, it would not mean that it is the income in the hands of the assessee. As observed in case of CIT vs. Tollygunje Club Ltd. [1977 (3) TMI 1 - SUPREME COURT] every receipt in the hands of an assessee need not be its income, and it is only when it bears the character of income at the time when it reaches the hands of the assessee that it becomes eligible to tax. CIT(A) in the totality of the facts involved in the case before us, had rightly concluded, that as the principle of diversion of income at the source by overriding title is attracted, therefore, the receivable of NPAs were the income of the SR holders, irrespective of the fact that the same had flowed through the books of accounts of the assessee trust. Holding assessee trust as an indeterminate Trust (discretionary trust) - HELD THAT:- We are in agreement with the view taken by the CIT(A) that as neither any discretion have been given to the trustee to decide the allocation of the income every year, nor any right is given to the beneficiary to exercise an option to receive the income or not each year, therefore, it cannot be held that the share of the beneficiaries were indeterminate. In our considered view, as the names of the beneficiaries of the assessee trust and their shares were known since inception i.e at the time of the formation of the trust as is evident from the minutes of the meeting dated 27.12.2007, therefore, it can safely be concluded that the assessee trust is a determinate trust i.e a non-discretionary trust. Accordingly, finding no infirmity in the view taken by the CIT(A) who had rightly concluded that the assessee is a determinate trust, we uphold the same. Treatment of Write-back of Impairment provision - HELD THAT:- Reversal of the impairment provision created by the assessee in the earlier years in respect of the financial asset was merely a book entry without any corresponding amount payable by anybody or any possibility of receiving any benefit or money or money s worth. We are of a strong conviction that a write back of a provision can be made taxable only if the same was claimed as a deduction in the earlier year when it was created. We have perused the observations of the CIT(A), and are in agreement with the view therein taken by him. Accordingly, concurring with the view taken by the CIT(A) that the write-back of the impairment provision could not have been treated as the income of the assessee. - Decided against assessee.

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• 2020 (9) TMI 464
  Reopening of assessment u/s 147 - notice u/s. 143(2) was issued by the AO before the date when the assessee filed his return of income - HELD THAT:- Notice u/s. 148 of the Act dated 08.05.2014 was issued asking the assessee to file the return of income. In response to the same, the assessee filed letter dated 21.08.2014 filed the return of income in response to these notices. But the AO has issued notices u/s. 143(2) of the Act dated 11.08.2014 i.e. prior to the filing of the return of income i.e. on 21.08.2014. We are of the view that notice u/s. 143(2) dated 11.08.2014 was issued by the AO before the date when the assessee filed his return of income i.e. 21.08.2014. Assessment framed by the AO on the basis of these notices is not sustainable in the eyes of law, hence, we quash the same. Our view is supported by the various following judgments/decisions especially the Hon ble Supreme Court Decision in the case of Laxman Das Khandelwal [2019 (8) TMI 660 - SUPREME COURT] . Assessee has filed the return on 21.08.2014 and thereafter no notice u/s. 143(2) of the Act was issued by the AO, however, the same is mandatory requirement under the provisions of law. - Decided in favour of assessee.

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• 2020 (9) TMI 463
  Depreciation on goodwill - difference in the purchase price and the fair value of assets based on the relevant provision of law - HELD THAT:- CIT(A) has agreed on the contention raised by the Assessee regarding depreciation of goodwill representing the difference in the purchase price and the fair value of assets based on the relevant provision of law (Section 32 read with Rule 5 and Appendix-I) and in due deference to the decision of the Hon ble Apex Court in the case of CIT vs. Smifs Securities Ltd. [ 2012 (8) TMI 713 - SUPREME COURT] has set aside the issues in dispute to the Assessing Officer with the directions to work out the appropriate amount of depreciation on goodwill while giving effect of the impugned order dated 13.12.2016 i.e. year in dispute. No doubt the ITAT has also set aside this issue to the Assessing Officer to decide the same in accordance with law, after giving opportunity to the assessee in its decision dated 28.08.2020 in assessment year 2012-13. But we are of the view that in the impugned order, Ld. First Appellate Authority has also set aside the issue of depreciation on goodwill to the AO to workout the appropriate amount of depreciation on goodwill, therefore, we are of the considered view that no interference is called for in the well reasoned order passed by the Ld. First Appellate Authority, hence, we uphold the findings of the Ld. First Appellate Authority on the issue of depreciation of goodwill. Appeal of the Revenue is dismissed.

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• 2020 (9) TMI 462
  Penalty u/s 271 (1) ( C ) - deduction u/s 24 (a) was disallowed - CIT-A deleted the penalty on the above sum for the reason that the rental income is shown by the assessee, the tax deduction at source is allowed to the assessee, the remittance of the sum to the charitable trust is also demonstrated, therefore, the disallowance of the statutory deduction u/s 24 (a) is a simple disallowance and does not involve any element of concealment of income or furnishing of inaccurate particulars - HELD THAT:- Though DR could not point out the reason that mere disallowance of the statutory claim when the assessee has been taxed under the head income from house property will result into penalty u/s 271 (1) (C) - for the reason that the penalty notice does not show any of the twin charges, on which the penalty has been levied by the learned assessing officer, as none of them has been struck off, on this ground, we do not find any infirmity in the order of the learned Commissioner of is in deleting the penalty on above disallowance. Disallowance of provisions for gratuity u/s 43B - Commissioner - A deleted the penalty on the above sum holding that the assessee has furnished the details in the income tax return, in the books of account, in the work in progress - HELD THAT:- The penalty on this sum was deleted. DR could not show us any reason that penalty on the above sum is leviable. Further, it is also not free from doubt whether such disallowance can be made u/s 43B of the income tax act or not when the assessee itself is not claim the above deduction in the computation of total income. Merely because the disallowance has been confirmed by the higher forum, it cannot automatically result into penalty. Further for the reasons given by us, relying upon the decision of the jurisdictional High Court in case of principal Commissioner of income tax versus Sahara India life insurance Co Ltd [ 2019 (8) TMI 409 - DELHI HIGH COURT ] we do not find any infirmity in the order of the learned some is CIT A in deleting the penalty on the above disallowance. No infirmity in the order of the learned CIT A in cancelling the penalty levied u/s 271 (1) (C) of the act. - Decided in favour of assessee.

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• 2020 (9) TMI 461
  TDS u/s 194A - Disallowance u/s.40(a)(ia) - non-deduction of tax at source on interest paid to some of the members, which were held to be not legal members - whether nominal members, associate members and sympathizer members were also covered by the exemption under section 194A(3)(v)? - HELD THAT:- We are primarily concerned with clause (v) of sub-section (3) of section 194A which provides that sub-section (1) shall not apply: `to such income credited or paid by a co- operative society to a member thereof or to any other co-operative society . On a harmonious reading of sub-sections (3) and (1) of section 194A, it becomes apparent that a co-operative society is required to deduct tax at source from any interest paid by it except where the interest is paid to its Member or to any other Cooperative society. In other words, if interest is paid by it to its Members, the same does not require any deduction of tax at source. It is manifest that the question of deduction of tax at source u/s 194A was nowhere before the Hon ble Supreme Court in THE CITIZEN CO-OPERATIVE SOCIETY LIMITED, THROUGH ITS MANAGING DIRECTOR, HYDERABAD VERSUS ASSISTANT COMMISSIONER OF INCOME TAX [ 2017 (8) TMI 536 - SUPREME COURT] which is currently under consideration. In view of the categorical judgment of Hon ble jurisdictional High Court in Jalgaon District Central Cooperative Bank Ltd. [ 2003 (9) TMI 56 - BOMBAY HIGH COURT] setting aside circular No.9/2002, which, in turn, made a distinction between various classes of members and entitled only some classes to the benefit of section 194A(3)(v) of the Act, there remains no doubt whatsoever that payment of interest by a cooperative bank to its Members, whether admitted in accordance with the bye-laws or otherwise, does not require deduction of tax at source. So long as any person is a Member , payment of interest to him has to be covered within the mandate of clause (v) of section 194A(3) requiring no deduction of tax at source. Since the assessee made payment of interest amounting to HUF and unregistered firms, which happened to be its Members , we hold that the authorities below were not justified in making and confirming disallowance u/s.40(a)(ia). - Decided in favour of assessee.

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• 2020 (9) TMI 460
  Exemption u/s 11 - assessee society is registered u/s 12AA - assessee trust provided undue benefit in lieu of salary to the persons specified u/s 13(3) - HELD THAT:- From the above decision of the ITAT in assessee s own case [2018 (8) TMI 748 - ITAT JAIPUR ] we noticed that even if the salary paid to the trustee are held to be unreasonable even then the exemption cannot be denied. Only excess/ unreasonable salary paid to the trustee, would not be entitled to the benefit of Section 11 of the Act. CIT(A) after taking into consideration the decision of ITAT Jaipur bench in assessee s own case for the Assessment Year 2014-15 [2018 (8) TMI 748 - ITAT JAIPUR] had correctly held that exemption u/s 11 cannot be denied in respect of entire surplus of the society. The present ground has been taken in appeal by the Department only on the ground that the order of ITAT for the A.Y. 2014-15 was not accepted by the Department. These arguments of the Revenue are not sustainable in the eye of law as merely filing of appeal against the order of ITAT is not enough and the Revenue has to show as to whether the Hon ble High Court has stayed the operation of the said impugned order and in case there is no stay order by the Hon ble High Court then the Revenue is bound as on today by the decision of the Coordinate Bench of ITAT in assessee s own case (supra) for the A.Y. 2014-15 and thus we dismiss these grounds raised by the Revenue. According, the Ground No. 1 to 3 raised by the Revenue are dismissed. Claim of capital expenditure - HELD THAT:- ITAT Coordinate Bench in assessee s own case for the A.Y. 2014-15 [2018 (8) TMI 748 - ITAT JAIPUR] has already held that the assessee is entitled to exemption u/s 11 of the Act then the capital expenditure is to be considered as application of income in computing the total income of the assessee. Therefore, the ld. CIT(A) under these facts and circumstances of the case has rightly directed the AO to allow the claim of capital expenditure as application of income. No new facts or circumstances have been brought before us in order to controvert or rebut the findings so recorded by the ld. CIT(A). Therefore, we find no reason to interfere into the lawful findings so recorded by the ld. CIT(A). Ground raised by the Revenue also stands dismissed. Disallowance of excess payment of salary to specified person u/s 13 - HELD THAT:- Since the order of the AO in set aside proceedings for the A.Y. 2014-15 was passed in pursuance to the direction of ITAT for A.Y. 2014-15 wherein salary paid to Hema Choudhary, Deepak Rastogi and Meghna Singhal has been accepted as reasonable. Therefore, we set aside the order of the ld. CIT(A) for the year under consideration and delete the disallowance of salary paid to these persons i.e. Hema Choudhary, Deepak Rastogi and Meghna Singhal. So far as the salary paid in respect of DR.Pankaj Garg and Smt. Vidushi Garg are concerned, we restore the matter back to the record of the AO for afresh adjudication after proper verification and examination of all the relevant facts. Thus the assessee is directed to produce all the relevant facts to establish the actual rendering of services by these two persons and also all the rules applicable in respect of the qualification and appointment of persons on such posts. Thus the appeal of the assessee is partly allowed for Statistical purposes.

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• 2020 (9) TMI 459
  Reopening of assessment u/s 147 - non deduction of tds u/s 195 - disallowing expenses u/s.40(a)(i) observing that the assessee could neither prove that it had made application to the AO to determine the appropriate portion of the sum so chargeable u/s 195(1) and neither the undertaking nor the CA certificate for the FY 2010-11 as envisaged in the CBDT circulars was referred to - CIT-A deleted both reopening and addition u/s.40(a)(i) - HELD THAT:- From a bare perusal of the reasons recorded by the AO for reopening of assessment it is clear that the AO has reopened the assessment on the ground that the foreign currency was incurred without making TDS u/s.195 and no application under section 192(2), 192(3) or 197 of the Act was made by the assessee for non-deduction of tax u/s.195. On perusal of the relevant materials placed on record, we find that the during the original assessment proceedings, the AO had considered the issue of non-deduction of tax u/s.195 on payment made to foreign parties and had not made any disallowance. After that no new fact has come to the knowledge of the AO after the original assessment was framed under Section 143(3) of the Act vide Order dated 14.03.2014. The AO has merely re-examined the profit and loss account of the assessee to initiate the reassessment proceedings. In any case, the CIT(A) has in the impugned order at page 8 has recorded a finding of fact that the very same payment has been discussed elaborately in the original assessment order passed under Section 143(3) of the Act. CIT(A) has followed the decision of Kelvinator of India ltd [ 2010 (1) TMI 11 - SUPREME COURT ] wherein, it was held that the concept of change of opinion must be treated as an inbuilt test to check the abuse of power by the AO and that even after 1.4.1989, the date from which the amended provisions of section 147 came into force, the AO has power to reopen an assessment, provided there is tangible material to come to the conclusion that there is escapement of income from assessment. In this case, no tangible material has come to the knowledge of the AO to reopen the assessment. Ld CIT(A) has also followed the decisions of this Tribunal in assessee s own case under similar facts in quashing the reassessment order. In the reasons recorded for reopening of assessment, there is no whisper, what to speak of any allegation, that the assessee had failed to disclose fully and truly all material facts necessary for assessment and that because of this failure there has been an escapement of income chargeable to tax. Merely having a reason to believe that income had escaped assessment, is not sufficient to reopen the assessment - there was no new tangible materials, as discernible from the reasons recorded by him for initiation of reassessment proceedings in his hands, thus, it is a case of change of opinion. - Decided in favour of assessee.

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• 2020 (9) TMI 458
  Exemption u/s 11 - assessee society is registered u/s 12AA - Assessee trust has provided undue benefit in lieu of salary and allowances to the persons specified u/s 13(3) - whether there is a violation of section 13(1)(c) or 13(1)(d) of the Act and whether exemption u/s 11 and 12 of the Act is to be denied in toto or only the relevant part of the income is to be charged to tax u/s 11 in view of Section 164(2) ? - HELD THAT:- Where the whole or any part of the relevant income is not exempt u/s 11 or 12 because of the provisions of the section 13(1)(c) or 13(1)(d), tax is chargeable on the relevant income or part of the relevant income at the maximum marginal rate (MMR). Therefore, in case there is violation of sec.13 of the Act then the entire income of the trust is not liable to tax at MMR, but only the relevant part of the income which violates sec.13 attracts the MMR. In the present case, even if it is held that there is violation of sec.13, then only the amount of benefit given to the persons specified u/s 13(3) out of the income of the trust is chargeable to tax at MMR. Hence, the action of AO in taxing the surplus at maximum marginal rate without considering the provisions of section 11 12 is bad in law. Provision of Section 164(2) lays down that where relevant income or part of the income is not exempt u/s 11 due to violation of Section 13(1)(c ) or 13(1)(d) of the Act, then in that eventuality tax shall be charged on the relevant income or part of the relevant income at MMR and not that entire income of the trust would be charged to tax at MMR. - Decided against revenue. Disallowing travelling expenses, staff expenses, staff welfare expenses, social welfare expenses and student welfare expenses to the extent of 95% - no proper bills vouchers were maintained by assessee - CIT-A restricted the addition to 5% - HELD THAT:- As during the course of assessment proceeding, the assessee had filed complete ledger account of these expenses alongwith bills and vouchers and the affidavit of temporary staff to whom salary has been paid but debited under the head social welfare and student welfare expenses. In the vouchers, complete details of the nature of expenses are mentioned. In social and staff welfare expenses the assessee had debited mainly the salary of the temporary employees in respect of which no PF was deducted. Since the assessee could not produce some of the documents of the employees as they were working in different schools of the society. Therefore, the ld. CIT(A) considering the details mentioned in the vouchers and facts circumstances of the had rightly restricted the disallowance out of these expenses at 5% - Decided against revenue.

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• 2020 (9) TMI 457
  TP Adjustment - comparable selection - HELD THAT:- Assessee is a company engaged in business of software development and related technical support services thus companies functionally with that of assessee need to be deselected from final list.

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• 2020 (9) TMI 456
  Reopening of assessment - Validity of reasons to believe - assessment initiated by reason of a revenue audit objection - HELD THAT:- Audit objection was toward short accounting of receipt, inferred on the basis of the TDS certificates, comparing the same with the books of account of the assessee. There is no dispute as to the nature of receipt, but only to the arithmetical accuracy of its accounts, doubted with reference to the TDS certificate/s, which stands duly clarified. It is, therefore, abundantly clear that the AO was satisfied with the assessee s reply (to the audit objection) as to there being no escapement of income, yet proceeded to issue notice u/s. 148(1), so that the same was only due to the non-acceptance of his reply by the audit party, i.e., at its insistence. It is the audit objection, as finally obtains, i.e., after having regard and giving effect to the AO s reply, that shall form part of the AO s reason to believe escapement of income to that extent, which is not so in the present case, and for which we have also perused the reasons recorded for the issue of notice u/s. 148(1), reproduced at para 2 (page 1) of the assessment order, forming part of the Tribunal s record. Why, a discrepancy in the assessee s accounts would result in a corresponding difference in its account with the party issuing the TDS certificate/s? We, accordingly, have, in the facts and circumstances of the case, little doubt that the assessment proceedings, though initiated by reason of a revenue audit objection, the same was not accepted by the AO inasmuch as he was not personally satisfied therewith. The terms of clause 10(c) of the Board circular clearly state of the revenue audit objection having been accepted by the Department. We are conscious that the words accepted by the Department , the import of which is surely wider, cannot be equated with the personal satisfaction of the AO issuing notice u/s. 148(1), in the absence of which, as found, as indeed in the instant case, the proceedings in Larsen Toubro Ltd . [ 2017 (3) TMI 1064 - SUPREME COURT] were struck down. Therefore, even though, strictly speaking, the issue of notice itself signifies its acceptance by the Department, as canvassed by the ld. DR, it may be of no consequence as the reassessment proceedings itself do not, in view of our finding as to the lack of personal satisfaction of the AO, survive. The Revenue fails. Rectification u/s 254 - Interpretation of the relevant clause of the Board s circular issued u/s. 268A(1) r/w s. 268A(5) - HELD THAT:- Rule of strict interpretation does not rule out applicability of reasonable construction to give effect to the purpose or intent of the provision ( Shree Sajjan Mills Ltd. v. CIT [ 1985 (10) TMI 2 - SUPREME COURT] . We are again conscious that we have held clause 10(c) as not applicable even on the terms thereof even as notice u/s.148(1) was issued, implying acceptance of the audit objection by the Revenue Same was only on the basis of a finding of fact by us, based on uncontroverted evidence, that the audit objection was indeed not accepted, nor the reason/s for non-acceptance, as advanced by the Assessing Officer, controverted, so as to then say that the issue of notice u/s. 148(1) resulted due to his acceptance of the audit objection, and which was therefore held by us as on account of insistence of the audit party. We also noted that it was only due to proceedings arising by the very terms of the impugned order, restoring status ante , that new materials (viz. LAR) were admitted, allowing arguments involving contentious issues. We also noted that though the words has been accepted by the Department in cl. 10(c) carries a broader connotation, i.e., than that of the words accepted by the assessing authority , an assessment made in the absence of the personal satisfaction of the assessing authority would not survive.

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• 2020 (9) TMI 455
  Addition u/s 14A - suo moto disallowance u/s 14A in respect of earning dividend income - HELD THAT:- CIT(A) has given a finding that the AO has correctly applied Clause 3 of Sub-Rule 2 of Rule 8D to compute the disallowance of expenses but from the perusal of record it can be seen that the assessee has made suo moto disallowance u/s 14A in respect of earning dividend income. The assessee has given a working before the AO on account of interest expenses and on account of administrative expenses on estimate basis. The same has not been properly adjudicated by the AO as well by the CIT(A). The assessee has given in its reply dated 23/12/2009, the details as to why the disallowance u/s 14A shall not be computed under Rule 8D. AO has computed the disallowance as per Rule 8D of the Income Tax Rules which is not applicable for the year under consideration as the present AY is 2007-08. It is pertinent to note that the AO has also not given the satisfaction as to how the working given by the assessee is not plausible. The assessee has made disallowance at 10% which was in support for the earlier AY 2006-07 which was confirmed by the Tribunal in assessee s own case [ 2019 (4) TMI 1900 - ITAT DELHI] . Therefore, the suo motu disallowance at 10% is reasonable and cannot be faulted with. We, therefore, set aside the findings of the CIT(A) and direct the Assessing Officer to accept the suo motu disallowance. Hence, the appeal filed by the assessee is allowed. Penalty u/s 271(1)(c) - HELD THAT:- Since the same is based on the quantum appeal and there is no finding given by the AO that the assessee furnished inaccurate particulars of income or concealed the particulars of income, the penalty does not survive as per the provisions of Section 271(1)(c) of the Income Tax Act, 1961. Hence, appeal filed by the assessee is allowed. Addition u/s 43A - foreign currency loans in respect of which foreign exchange gains or losses - for the purpose of investing in shares which were capital assets in the hand of the company in the relevant years, when the loan were raised - HELD THAT:- It is pertinent to note that the Revenue has not brought on record that any capital assets were acquired from a country outside India during the relevant assessment year. The applicability of Section 43A will not be attracted when there is no acquisition of any capital assets in the relevant assessment year. CIT(A) rightly held that the assessee correctly offered net exchange gain earned by it on account of currency fluctuation computed by considering the rate of USD as on the date of loan taken in the earlier years and final settlement thereof in the year under reference. Since, the assessee already disallowed in its statement of taxable income for the A.Ys 2005-06 and 2006-07 notional losses accounted for by it to comply with AS- 11, no further disallowance of such losses was called for and the same amount to double disallowance. Thus, the CIT(A) rightly deleted the said addition. - Decided in favour of assessee.

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• 2020 (9) TMI 454
  Deduction u/s.10A - exclusion of telecommunication expenses, insurance charges and foreign exchange loss both from the export turnover and total turnover for the purpose of computation of deduction u/s. 10A - HELD THAT:- It is not in dispute before us that the Hon ble High Court of Karnataka in the case of CIT v. Tata Elxsi Ltd [ 2011 (8) TMI 782 - KARNATAKA HIGH COURT] has held that charges/expenses relating to telecommunication, insurance charges and foreign exchange loss should be excluded both from export turnover and total turnover while computing deduction u/s.10A of the Act i.e., whatever is removed from the numerator should also be excluded from the denominator while working total turnover and export turnover for allowing deduction u/s.10A of the Act. The aforesaid decision of the jurisdictional High Court has been upheld in the case of CIT v. HCL Technologies [ 2018 (5) TMI 357 - SUPREME COURT]. TP Adjustment - Application of turnover filter in choosing comparable companies - whether companies having turnover more than 200 crores upto 500 crores has to be regarded as one category and those companies cannot be regarded as comparables with companies having turnover of less than 200 crores - HELD THAT:- No infirmity in the directions of the DRP in excluding the companies having turnover more than Rs. 200 crores. Consequently ground No.4 raised by the revenue is dismissed. Grant of risk adjustment @ 1% by DRP - HELD THAT:- DRP has not directed the AO to allow risk adjustment @ 1%, but has only directed the AO to decide the percentage of risk adjustment to be calculated and to take guidance from the decision of Hellosoft Pvt. Ltd. [ 2013 (10) TMI 747 - ITAT HYDERABAD] . Hence we are of the view that the ground projected by the revenue does not arise out of the directions of the DRP. Application of RPT filter between 15% and 25% - HELD THAT:- DRP, however, following the decision of the ITAT Delhi Bench in the case of Mentor Graphics P. Ltd. [ 2007 (11) TMI 339 - ITAT DELHI-H] took the view that there should be Nil RPT for a company to be taken as a comparable company. The department is in appeal on the above conclusion of the DRP. Inclusion of Thinksoft Global Services Ltd., and Persistent Systems Solutions Ltd. - DR s objection was that the assessee not having challenged the inclusion of Persistent Systems Solutions Ltd. and Thinksoft Global Ltd. before the DRP, cannot seek to take advantage of the DRP s direction of RPT filter and seek exclusion of these two companies. As far as ICRA techno analytics Ld., is concerned, the Assessee challenged the inclusion of this company on functional comparability but not on application of RPT filter. As far as application of RPT filter is concerned, this Tribunal has been taking a consistent view that the threshold limit for application of RPT filter should be 15% and in cases where the available samples are less, then the threshold limit can be fixed at 25%. Therefore, we are of the view that the directions of the DRP fixing the threshold limit as 0% for application of RPT filter is not correct. We direct the TPO to adopt the RPT filter @ 15% and decide the comparability of all the companies that remain for comparability as per the directions in this order. KALS Information Systems Ltd. on the ground that it is not functionally comparable with SWD service provider such as the assessee. Disallowance of lease rentals claimed as revenue expenditure - HELD THAT:- From the order of AO and DRP as well as the submissions made by the assessee before us, it is not clear as to what is the break-up of the fit-outs that was provided in the lease premises. A copy of the lease agreement between the assessee and owner of the property is at and this agreement does not contain any description of the nature of fit-outs. Without the details and nature of fit-outs, it is not possible to conclude whether the expenditure is capital or revenue in nature. In the circumstances, we deem it fit and proper to set aside the order of AO and remand the question for consideration de novo by the AO with a direction to ascertain the nature of fit-outs and the manner of adjustment of cost of fit-outs between the assessee and the owner of the premises who provided the fit-outs. Ground No.10 is accordingly decided. Disallowance of contribution to approved gratuity fund - HELD THAT:- Since before passing the final order of assessment, opportunity is not given to the assessee, the assessee could not point out the evidence already filed before the AO. We are therefore of the view that this issue should also be set aside to the AO for verification of proof of payment. If necessary evidence is available on record, the AO is directed to allow deduction and if some additional evidence is required, the AO should afford opportunity to assessee to produce the same to substantiate its claim for deduction. We hold and direct accordingly. Error in computation of deduction under section 10A - Incorrect amount of export turnover considered for computation of section 10A deduction - HELD THAT:- At the time of hearing, both the parties agreed that the aforesaid incorrect computation requires verification by the AO and for this purpose this has to be sent back to the AO. Accordingly the AO is directed to consider the plea of the assessee and rectify the error in the computation of deduction u/s. 10A.

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• 2020 (9) TMI 453
  Assessment u/s 153A - Deduction towards interest on excise duty - only contention raised by the ld. CIT(D.R.) is that the CIT(Appeals) has passed a very cryptic order, wherein he has allowed a substantial relief to the assessee on the issue under consideration without giving any cogent or convincing reason - HELD T HAT:- CIT(Appeals) would have been right to entertain the claim of the assessee for deduction on account of interest on excise duty pertaining to earlier years in the year under consideration keeping in view the observations made by the Tribunal in its order [ 2015 (6) TMI 675 - ITAT KOLKATA] passed in assessee s case for A.Y. 2009-10 and the fact that the assessment proceedings initiated by the Assessing Officer for the year under consideration under section 143(2) had got merged as a result of search with the proceedings under section 153A, which were open. Inspite of taking note of the order of the Hon ble Delhi High Court [ 2012 (4) TMI 707 - DELHI HIGH COURT] on the basis of which the liability of the assessee on account of interest in question was taken as crystallized by him in the year under consideration, the ld. CIT(Appeals) failed to take note of a very relevant and material fact that the interest charged by Customs and Central Excise Settlement Commission was reduced by the Hon ble Delhi High Court and the liability of the assessee on account of the said interest after adjusting the amount \already paid by the assessee was reduced. This clearly shows the non-application of his mind by the ld. CIT(Appeals) to the relevant and material facts having a direct bearing on the quantum of liability of the assessee on account of interest in question - remit the matter back to him for deciding the same afresh by passing a well discussed and well reasoned order after giving the assessee a proper and sufficient opportunity of being heard. - Appeal filed by the Revenue is treated as allowed for statistical purposes.

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• 2020 (9) TMI 452
  Disallowance of expenditure debited into profit and loss account - HELD THAT:- Business of the assessee has been setup and has commenced during the year under consideration and consequently, necessary expenditure incurred for the purpose of business needs to be allowed s deduction, whether or not any revenue is generated for the year under consideration. CIT(A) after considering relevant facts has recorded categorical findings that the assessee business has been set-up and has commenced its activities and accordingly, all expenditure incurred for the purpose of business needs to be allowed. Facts remains unchanged. The revenue has fails to bring on record any evidences to prove that the findings of facts recorded by the Ld.CIT(A) is incorrect. Assessee has filed necessary evidences to prove that it has commenced its business activity and has generated income from business operations. Therefore, we are of the considered view that the Ld.CIT(A) was right in deleting additions made towards disallowances of expenditure and hence, we are inclined to uphold the findings of Ld.CIT(A) and reject ground taken by the revenue. Addition towards share application money received u/s 68 - HELD THAT:- Assessee has received share application money through proper banking channels. The creditor has filed its financial statements and ITR acknowledgment, which clearly suggest that the creditor has enough source of income to explain the capacity to advance share application money. The other facts brought out by the Ld. AO, as well as the Ld.CIT(A) regarding change of name and subsequent closer of the company is not material to decide the issue, because what is relevant to see is whether, three ingredients provided u/s 68 has been satisfactorily explained or not. In this case, on perusal of details filed by the assessee, we find that the assessee has discharged its onus and prove the credit being share application money received from Global Emission Management Pvt.Ltd with all possible evidences. AO, as well as the Ld.CIT(A) were erred in confirmed additions made towards share application money received from Global Emission Management Pvt.Ltd. Hence, we direct the Ld. AO to delete additions made towards share application money received from Global Emission Management Pvt.Ltd. Appeal filed by the revenue is dismissed

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• 2020 (9) TMI 429
  Depreciation on good will value - HELD THAT:- Issue settled in favour of the assessee and against the revenue by the Tribunal in assessee s own case [2020 (8) TMI 50 - ITAT DELHI] - Claim can be considered in the hands of the assessee subject to verification of the factual aspects in the hands of the assessee. AO was of the view that the claim was not allowable because of the decision of Goetz India Ltd. [2006 (3) TMI 75 - SUPREME COURT] though he has made some reference to the factual aspects of the case. DRP has not adjudicated this issue; though the CIT(A) has allowed the claim of the assessee in Assessment Year 2011-12. The present Assessment Year being the year in which agreement was entered into i.e. dated 20.06.2008, it is considered fit to remit this issue of determining resultant amount of goodwill on which depreciation is allowable in the hands of the assessee. Disallowance of marked to market foreign exchange loss - HELD THAT:- As decided in own case [2020 (8) TMI 50 - ITAT DELHI] reverse the orders of Assessing Officer in this regard and direct the Assessing Officer to delete the disallowance made on account of mark to market foreign exchange loss.

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• 2020 (9) TMI 428
  Reopening of assessment u/s 147 - Additions u/s. 68 - proceedings u/s. 153A - HELD THAT:- In the reasons recorded mentioned elsewhere the AO observed that income has not been offered to tax in the return of income for A. Y.2011-12 whereas as mentioned elsewhere in all his return of income which clearly mentioned income claimed to be exempt u/s. 10 (38) as mentioned elsewhere the same was thoroughly examined after search operations at the premises of the assessee and after thorough examination the assessment was framed u/s. 153 A therefore, in the light of the decision of CARGO CLEARING AGENCY (GUJARAT) [ 2008 (8) TMI 86 - GUJARAT HIGH COURT] we are of the considered view that reopening of the assessment which was framed u/s. 153 A of the Act is bad in law. AO clearly show that there was no application of mind while issuing of notice u/s. 148 of the Act in as much as had he gone through the assessment records of the assessee he would have seen the computation of income filed with original return income and also with the return of income tax in response to notice u/s. 153 A of the Act. If he had done this exercise he would have known that LTCG has not only been disclosed in the return of income but the same was also claimed to be exempt. Proceedings has been initiated on the basis of no material less any tangible and relevant material and as such reasons recorded do not constitute valid reasons. Moreover the reopening is only on the basis of borrowed satisfaction and as mentioned elsewhere reasons are factually incorrect and the conclusion drawn by the AO in the assessment is contradictory. We hold that the assumption of jurisdiction by the issue of notice u/s. 148 of the Act is bad in law which is quashed and accordingly the assessment so framed is also quashed. - Decided in favour of assessee.

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• Benami Property

• 2020 (9) TMI 451
  Benami transaction made in the name of the person and his brother or sister with both their names jointly occurring in any document - Exemption u/s 2(9)(A)(iv) - HELD THAT:- Trial Court has gone into the merits of the amendments and has virtually found that the petitioner is not eligible to claim the benefits of the aforementioned exemption under Section 2(9)(A)(iv) - It was not within the province of the Trial Court to have entered into the merits of the contentions of the petitioner at that stage; and all that it could have considered was whether the amendments were liable to be allowed under the ambit of Order VI Rule 17 of the CPC and nothing more nothing less. Of course, the contention of Sri.Narendra Kumar is that the suit itself is not maintainable before the Trial Court and that it ought to have been transferred to the competent Adjudicating Authority under the Act but it does not, in any manner, impact the application for amendment sought for by the petitioner because, even if the suit is found liable to be transferred to the Adjudicating Authority, then the said authority would have to consider it on its merits, before moving forward. This aspect has also not been considered by the Trial Court and for this reason, cannot find in favour of the impugned order. Ext.P4 interim application filed by the petitioner, requires to be reconsidered by the Trial Court, also adverting to the assertions of Sri.Narendra Kumar that the provisions of the Act enjoins it to transfer the suit to the appropriate Adjudicating Authority, even before the amendments can be considered. Original Petition is allowed, leading to Ext.P7 order being set aside; with a consequential direction to the Trial Court to reconsider Ext.P4.

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• Customs

• 2020 (9) TMI 450
  Provisional release of car imported - only area of dispute is that according to the petitioner, the imported vehicle is a brand new one whereas according to the respondents, it is a second hand model - HELD THAT:- It is admitted that petitioner has paid the entire duty of Rs. 72,48,875.00 on the declared assessable value of the imported car of Rs. 33,71,569.00. It is also an admitted position that the vehicle is under seizure, seizure being made on 20.03.2020 though under detention since 11.01.2020 and that it has neither been confiscated nor adjudication has commenced. Section 110 of the Act deals with seizure of goods, documents and things. Sub-section (1) says that if the proper officer has reason to believe that any goods are liable to confiscation under the Customs Act, he may seize such goods. While we are not called upon to adjudicate on the correctness of the decision to seize the imported vehicle in the present proceeding, what is relevant to note is that the condition precedent for seizure of any goods is that the proper officer must have reason to believe that such goods are liable to confiscation under the Customs Act. Confiscation is provided under section 111. Therefore, contention of the respondents that the vehicle was seized under section 111(d) is not correct. Seizure was made under section 110 perhaps on the belief that the vehicle is liable to confiscation under section 111(d). As a matter of fact, section 110A provides a pragmatic mechanism to facilitate provisional release of seized goods etc. to the owner pending adjudication but at the same time protecting the interest of the revenue. Keeping the above in mind, the provision is required to be understood and applied. This Court modified the order of provisional release by directing provisional release of the Ferrari F 430 car subject to petitioner executing a bond for full value and furnishing bank guarantee of any nationalized bank for Rs. 15 lakhs. Further condition imposed was that petitioner should not create any third party right, title or interest in the said imported car till adjudication proceedings reached finality - When the statute itself provides for provisional release of seized goods, merely on the ground that the good in question is a prohibited one or that the aggrieved person has filed appeal before the CESTAT cannot be the reason not to exercise the statutory discretion conferred by section 110-A. Petition disposed off.

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• 2020 (9) TMI 449
  Levy of Penalty u/s 112 (a) of the Customs Act on the employees of CHA - Absolute Confiscation - Smuggling - declared goods were 144 air conditioners as per the bill of entry, however, on inspection, it was found to contain 65 air conditioners, 940 cylinders of Refrigerant 22 gas and 315 Sony Play Stations - prohibited goods or not - HELD THAT:- No case of aiding and abetting is made out against this appellant. This appellant as an employee of the CHA company was working as per the instructions given to him by his senior. There is no case made out of any abnormal gain by the appellant to indicate any collusion or abetment on his part with the importer of the consignment under dispute Shri Goyal and/or Shri Brijesh Mishra. Penalty has been imposed mechanically without application of mind - Accordingly, the penalty imposed under Section 112 (a) of the Customs Act is set aside - appeal allowed - decided in favor of appellant.

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• 2020 (9) TMI 448
  100% EOU - clearance of cotton waste to domestic tariff area - Benefit of N/N. 1/95-CE dated 4th January 1995 and N/N. 22/03-CE dated 31st March 2003 pertaining to domestic procurement of raw materials and consumables - Benefit of N/N. 53/97-Cus dated 3rd June 1997 and no. 52/03-Cus dated 31st March 2003 - whether payment of excise duty at nil rate on clearance of cotton waste to domestic tariff area (DTA) in manner as prescribed by EXIM Policy, would be covered by the phrase on payment of appropriate duty of excise used in these exemption notifications, making appellants entitled to the benefit of these exemption notifications or otherwise? HELD THAT:- Admittedly revenue had earlier issued a Circular in 1995 clarifying that appropriate rate of duty will include the nil rate of duty. Hence the view was that though Supreme Court had decided the issue, holding that appropriate rate of duty will not include the case of payment of duty at nil rate, but in view of Circular/ clarification issued, the interpretation made in circular will be binding on the revenue authorities. However this view was not concurred by the Hon ble Supreme Court and in case of Kalyani Packaging [ 2004 (5) TMI 78 - SUPREME COURT ], Hon ble Supreme Court held that cases where benefits has been granted, cases should not be reopened. Otherwise Courts/Tribunals can not ignore a judgment of this Court and follow circulars of the Board - The decision of Kalyani Packaging was affirmed by the five member bench of Hon ble Supreme Court in case of Rattan Wire and Melting [ 2008 (10) TMI 5 - SUPREME COURT ]. Five Member bench of Hon ble Supreme Court has in case Dilip Kumar Co [ 2018 (7) TMI 1826 - SUPREME COURT ] settled the law in favour of strict interpretation of exemption notification and resolution of ambiguity in the interpretation of notification if any in favour of revenue. Thus, we are not in position to agree with the decision rendered by the Mumbai Bench of CESTAT, in case of M/S. TECHNOCRAFT INDUSTRIES (I) LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, THANE I [ 2019 (8) TMI 719 - CESTAT MUMBAI ], relied upon by the counsels for Appellant - In view of the decision of Hon ble Apex Court in case of Sant Lal Gupta Ors. [ 2010 (10) TMI 194 - SUPREME COURT ] and Hon ble Bombay High Court in case of Mercedes Benz India (P) Ltd. v. UOI, [ 2010 (3) TMI 300 - BOMBAY HIGH COURT ] the matter needs to be referred to the President for constitution of a larger Bench for consideration of the issue. The matter is referred to Learned President, for being placed before Larger Bench of Tribunal the following questions for consideration: a. Whether the term appropriate rate of duty used in the exemption notifications 1/95-CE dated 4th January 1995 and no. 22/03-CE dated 31st March 2003 pertaining to domestic procurement of raw materials and consumables and notification no. 53/97-Cus dated 3rd June 1997 and no. 52/03-Cus dated 31st March 2003, will cover the case where the finished goods are cleared on payment of duty at nil rate? b. Whether the CESTAT Mumbai in case of Technocraft Industries, was correct in holding that the benefit of these exemption notifications shall be admissible even when the finished goods are cleared on payment of duty at nil rate?

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• Corporate Laws

• 2020 (9) TMI 447
  Restoration of name of Awadh Risk Management Private Limited struck off by the Registrar of Companies - section 248 of the Companies Act, 2013 read with Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016 - HELD THAT:- The provisions pertaining to restoration of the name of the company has been provided in Section 252 of the Companies Act 2013 which includes that, if it is just and equitable to restore the name of the company in the Registrar of Companies, it may direct the ROC to restore the name in its Register. The Appellant has been able to satisfy this bench that it has certain assets which necessitate and justify the restoration of its name in the Register of Companies. A step as stringent as what has been taken at least requires an opportunity to the appellant to take remedial measures. Merely to disallow restoration on grounds of its failure to file annual returns would be neither just nor equitable - As per several decisions of various courts it should only be an exceptional circumstance that court should refuse restoration where the company has been struck off for its failure to file annual return as that would be excessive or inappropriate penalty for that oversight. The Registrar of Companies, the Respondent herein, is ordered to restore the original status of the Appellant Company as if the name of the Company has not been struck off from the Registrar of Companies and take all consequential actions such as change of Company s status from Strike Off to Active (for e-filing), restoration of status of DIN etc. Appeal disposed off.

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• 2020 (9) TMI 446
  Restoration of name of Rabia Textiles Private Limited struck off by the Registrar of Companies - Section 252(3) of the Companies Act, 2013 read with Rule 87A of the National Company Law Tribunal Rules, 2016 - HELD THAT:- Appellant Company has not filed its Annual Return and Balance Sheet with RoC. Moreover, the dispute regarding Nil turnover of the company is also taken into consideration. But failure on the part of the Appellant and its Directors to adhere to the statutory compliances and also Nil turnover of the Company is attributed to a variety of reasons including adverse market conditions, financial issues etc. The documents relied upon by the Appellant unmistakably demonstrate that the Appellant Company is a living entity. The provisions pertaining to restoration of the name of the company has been provided in Section 252 of the Companies Act 2013, which includes that, if it is just and equitable to restore the name of the company in the Registrar of Companies, it may direct the ROC to restore the name in its Register - The Appellant has been able to satisfy this bench that it has certain assets which necessitate and justify the restoration of its name in the Register of Companies. A step as stringent as what has been taken at least requires an opportunity to the appellant to take remedial measures. Merely to disallow restoration on grounds of its failure to file annual returns would neither be just nor equitable. As per several decisions of various courts it should only be an exceptional circumstance that court should refuse restoration where the company has been struck off for its failure to file annual return as that would be excessive or inappropriate penalty for that oversight. The Registrar of Companies, the Respondent herein, is ordered to restore the original status of the Appellant Company as if the name of the Company has not been struck off from the Registrar of Companies and take all consequential actions such as change of Company s status from Strike Off to Active (for e-filing), restoration of status of DIN etc. - Appellant Company is directed to file all the statutory document(s) along with prescribed fees/additional fee/fine as decided by RoC within thirty days from the date on which its name is restored on the Register of Companies by the RoC.

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• 2020 (9) TMI 445
  Restoration of name of M/s. Vishwa Printers Packagers Private Limited struck off by the Registrar of Companies - Section 152(3) of the Companies Act, 2013 read with Rule 87A of the National Company Law Tribunal Rules, 2016 - HELD THAT:- The provisions pertaining to restoration of the name of the company has been provided in Section 252 of the Companies Act 2013 which includes that, if it is just and equitable to restore the name of the company in the Registrar of Companies, it may direct the ROC to restore the name in its Register - The Appellant has been able to satisfy this bench that it has certain assets which necessitate and justify the restoration of its name in the Register of Companies. A step as stringent as what has been taken at least requires an opportunity to the appellant to take remedial measures. Merely to disallow restoration on grounds of its failure to file annual returns would neither be just nor equitable. As per several decisions of various courts it should only be an exceptional circumstance that court should refuse restoration where the company has been struck off for its failure to file annual return as that would be excessive or inappropriate penalty for that oversight. The Registrar of Companies, the Respondent herein, is ordered to restore the original status of the Appellant Company as if the name of the Company has not been struck off from the Registrar of Companies and take all consequential actions such as change of Company s status from Strike Off to Active (for e-filing), restoration of status of DIN etc.

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• 2020 (9) TMI 444
  Restoration of name of M/s. Rafey Builders Private Limited struck off by the Registrar of Companies - Section 252(3) of the Companies Act, 2013 read with Rule 87A of the National Company Law Tribunal Rules, 2016 - HELD THAT:- The provisions pertaining to restoration of the name of the company has been provided in Section 252 of the Companies Act 2013 which includes that, if it is just and equitable to restore the name of the company in the Registrar of Companies, it may direct the ROC to restore the name in its Register - The Appellant has been able to satisfy this bench that it has certain assets which necessitate and justify the restoration of its name in the Register of Companies. A step as stringent as what has been taken at least requires an opportunity to the appellant to take remedial measures. Merely to disallow restoration on grounds of its failure to file annual returns would be neither just nor equitable. As per several decisions of various courts it should only be an exceptional circumstance that court should refuse restoration where the company has been struck off for its failure to file annual return as that would be excessive or inappropriate penalty for that oversight. The Registrar of Companies, the Respondent herein, is ordered to restore the original status of the Appellant Company as if the name of the Company has not been struck off from the Registrar of Companies and take all consequential actions such as change of Company s status from Strike Off to Active (for e-filing), restoration of status of DIN etc.

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• 2020 (9) TMI 443
  Voluntary revision of financial statements - Income Recognition - NPA - Section 131 of the Companies Act, 2013 read with Rule 77 of the National Company Law Tribunal Rules, 2016 - HELD THAT:- Neither of the respondent authorities have disputed the existence of annexure A-4 i.e. Master Circular of Prudential Norms on Income Recognition, Assets Classification and Provisioning- pertaining to Advances Portfolio of the Reserve Bank of India and its applicability to the loans given by the banks when the said loans become NPA. The petitioner has filed Annexure A-5 i.e. statement of the loan account and the OTS letter issued by the bank to show that the bank has not followed the RBI Circular, while treating the loan which was classified as NPA and the subsequent OTS, whereunder the loan was closed on payment of the required amount as a full and final settlement of the loan account. A perusal of Section 131 of the Act, which was notified with effect from 01.06.2016, reveals that the same was provided to meet the situations as mentioned in the petition, subject to fulfilling the requirements therein. Once Section 131 of the Act, provides for revision of the financial statements in respect of any of the three preceding financial years , it clearly encompasses three prior years upon notification of the concerned section. Thus the contention of the ROC that the petition is not maintainable in respect of any financial year prior to 2016-17 cannot be accepted. What is required to be seen is that whether the petitioner-company satisfies the requirements under Section 131 of the Act read with Rule 77 of the 2016 Rules. In any case, as per the Income Tax Returns of the petitioner-company, for the relevant years in question, copies of which are filed in Annexure A-6 (Colly) as already stated, it is seen that the relevant interest amounts for the particular years, being treated as accrued and not paid, is added back in computation to arrive at the assessable income. Thus there is no impact on revenue from the perspective of the Income Tax Department. The petitioner-company fulfilled the requirements under Section 131 of the Act and Rule 77 of the 2016 Rules and accordingly, the petitioner-company is entitled for seeking revision of its financial statements or board s report, for the financial years, in question - Since the submissions with regard to treatment of NPA account by the bank and the settlement of the same by the petitioner-company with the bank as an OTS, is sufficiently proved by the petitioner by filing various documents and the said documents are not disputed by the respondent-authorities, the contention that the bank is a necessary party to the CP, is not tenable. In view of the provisions of the Section 131 of the Act, the instant petition is allowed and the petitioner is permitted to revise the financial statements of the company for the years 2015-16, 2016-17 and 2017-18, as per the accounting standards and its Board s reports - Petition allowed.

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• 2020 (9) TMI 442
  Approval of Amalgamation Scheme - Sections 230 to 232 of the Companies Act, 2013 read with the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 and the National Company Law Tribunal Rules, 2016 - HELD THAT:- Upon considering the consent accorded by the members and creditors of the Petitioner Companies to the proposed Scheme, and the affidavits filed by the Regional Director, Northern Region, Ministry of Corporate Affairs and Official Liquidator there appears to be no impediment in sanctioning the present Scheme Sanction is hereby accorded to the Scheme under Section 230 to 232 of the Companies Act, 2013 - Petition disposed off.

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• 2020 (9) TMI 441
  Non-conduct of Annual General Meeting - fulfilment of mandatory legal obligation to conduct the Annual General Meeting of respondent No.1-company - HELD THAT:- In the event of default in holding the Annual General Meeting of a company under Section 96, this Tribunal is empowered under Section 97 of the Companies Act, 2013, for issuance of a direction for calling of an Annual General Meeting - Respondent Nos.2 and 3, who are the Directors of respondent No.1- company have not denied the mandatory obligation of respondent No.1- company to hold the Annual General Meeting within the prescribed period. In view of the mandatory requirement under the provisions of the Companies Act, 2013 and in view of the paramount interest of the company, as also the submissions made on behalf of both sides, we consider that this is a fit case of exercising the powers conferred under Section 97 of the Companies Act, 2013 - Respondent Nos.1 to 3 directed to convene, hold and conduct the Annual General Meeting within 30 days from today on any working day during business hours i.e. 9 AM to 6 PM, at the registered office of the respondent No.1-company at Gurugram, after duly certifying strict compliances of the procedures as contemplated under the Articles of Association of the company and the Companies Act, 2013.

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• Insolvency & Bankruptcy

• 2020 (9) TMI 440
  Maintainability of application - initiation of CIRP - Corporate Debtor defaulted in making repayment of its dues - Invocation of pledge shares - Whether the Application under Section 7 of I B Code, filed pursuant to the RBI Circular dated 12.02.2018? - HELD THAT:- In the case in hand NPA was declared on 28.10.2017 internal approval for filing the Application under Section 7 of I B Code, sought on 04.08.2018 and the Application was filed on 23.01.2019. In the Application there is no reference that the Application is filed in pursuant to the RBI Circular. As per RBI Circular the Application under Section 7 of I B Code, is required to be filed on or before 15 days from expiry of 180 days time period from reference date 01.03.2018, it means, in this case the Application would have filed on or before 12.08.2018 whereas it is filed on 23.01.2019. Therefore, there is no ground to presume that the Application under Section 7 of I B Code, is filed pursuant to the RBI Circular. Learned Adjudicating Authority in Para 12 of the impugned order has also rejected this objection. Whether the liability of the Corporate Debtor stood discharged in view of the invocation of the pledged shares by the Financial Creditor? - HELD THAT:- A bare perusal of the notice of invocation shows that the pledge had been invoked only on behalf of the phase I lenders. This notice was issued without prejudice to the rights and remedies against the borrower under the Financing Documents. This notice also specifically mentioned that the lenders and other secured parties expressly reserving the right to declare further default or invoke security from time to time. We are unable to convince with the arguments of Learned Counsel for the Appellants that after invocation of the pledged shares by the SBI CAP Trustee Company Ltd. liability of the Corporate Debtor stood discharged - It is true that after invocation of the pledge, Shares were transferred in dematerialised form in the DP Account of SBI CAP Trustee Company Ltd. and it became the beneficial owner of the shares it does not mean that the Financial Creditor became the beneficial owner of the shares and it losses the status of Financial Creditor. The Financial Creditor has not filed the Application under Section 7 of I B Code, in pursuant to the RBI Circular dated 12.02.2018 and even after invocation of the pledged shares by SBI CAP Trustee Company Ltd., the financial Creditor can maintain the Application. Learned Adjudicating Authority has rightly admitted the Application under Section 7 of I B Code. Application admitted - appeal dismissed.

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• 2020 (9) TMI 439
  Restraint on Respondents from disconnecting the electricity supply at the Bishnupur plant of the corporate debtor till completion of the corporate insolvency resolution process - section 14(2) and section 60 of the Insolvency Bankruptcy Code, 2016 - HELD THAT:- There are no substance in the arguments of the applicant that he still has any right to the goods or raw material lying in the premises of the CD, even after the order of CIRP. The provisions of the Code are very much clear in this regard. The RP is the final authority who will take possession of the moveable and immovable properties of the CD after the order of CIRP. Anybody has any claim against the CD, it will have to submit its claim to the RP. What is admittedly true in this matter is that the applicant has already submitted its claim and its claim has already been admitted and taken on record, which hardly leaves any scope for the applicant to further claim any right to possession, or hold any auction sale thereof as prayed for. Application dismissed as being devoid of any merit or substance.

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• 2020 (9) TMI 438
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT:- It is not in dispute that the corporate debtor received a sum of Rs. 6,11,10,000/- on 04.10.2018. The case of the operational creditor that this amount was given for supply of 6300 gift cards at Rs. 10,000/- per card. Whereas the case of the corporate debtor is that there was a balance to the tune of Rs. 31 crores to be paid by the operational creditor and that this money was given by the operational creditor towards part-payment for the outstanding balance and the same was also informed to the operational creditor by the corporate debtor through e-mail dated 07.10.2018. It is the case of the operational creditor that no amount was due to the corporate debtor. On the other hand the corporate debtor was contending that an amount of Rs. 31 crores was due from the operational creditor. When there was a prior dispute between the parties, a petition under section 9 of the I B Code cannot be admitted. Business transactions worth several hundreds of crores of rupees took place between the operational creditor and the corporate debtor. Therefore, the dispute raised by the corporate debtor cannot be said to be spurious, hypothetical or illusory. The next contention of the corporate debtor, in the alternative, is that the amount given as advance does not fall under the definition of operational debt. The case of the operational creditor is that money was given as an advance for supply of gift cards. It is true that advance, if any, given, does not come under the definition of operational debt. The case of the corporate debtor is that money was given for supply of gift cards after uploading the cards at Rs. 10,000/-per card. The money is given for uploading gift cards. Therefore, it cannot be said in the strict sense that it was an advance. We are unable to understand that money to be treated as advance of money. Money is intended for uploading cards and only after uploading cards delivery is to be effected. So in the strict sense, money given is not an advance in the nature of transaction carried between the operational creditor and the corporate debtor. However, there was prior dispute and as such the petition cannot be admitted. Petition dismissed.

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• 2020 (9) TMI 437
  Approval of Resolution Plan - CIRP process - dissenting financial creditors - Section 30(2)(b) of the Code read with Regulation 38(1)(b) of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - HELD THAT:- Resolution Professional as well as the Resolution Applicant with regard to treating of the applicant-SIDBI as a dissenting creditor and providing specific amount as required under Section 30(2)(b) of the Code and also since the applicant has not disputed the fact of willingness of the Resolution Applicant for payment of the differential amount, no further orders are required to be passed in the instant IA, with regard to the first ground. Payment to the dissenting financial creditors in priority over the assenting financial creditors in terms of Section 30(2)(b) read with Regulation 38(1)(b) of the 2016 Regulations - HELD THAT:- This is an issue to be considered by this Adjudicating Authority while deciding CA No.389/2019 filed under Section 30(6) and Section 31(1) of the Code, seeking approval of the Resolution Plan, since the same falls under Section 31 (1) i.e. if the adjudicating authority is satisfied that the resolution plan as approved by the committee of creditors under sub-section (4) of Section 30 meets the requirement as referred to in sub-section (2) of Section 30 . No financial creditor either assenting or dissenting can challenge a Resolution Plan, as approved by the CoC, even before the Adjudicating Authority approve the said Plan on the ground that the Plan does not meet the requirements of Section 30 (2) of the Code. Hence, there is no need to examine the rival submissions on this issue at this stage. Application dismissed.

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• 2020 (9) TMI 436
  CIRP Process - allegation that Resolution Professional noticed that respondent Nos.1 and 2, who are the suspended directors of the corporate debtor have made transactions transferring/paying certain amounts in violation of the moratorium - HELD THAT:- Admittedly, CP was admitted in respect of the corporate debtorcompany on 27.07.2018 and moratorium came into force w.e.f. the said date. The corporate debtor opposed the admission of the CP represented by a counsel appointed by the Board of Directors, consisting of respondent Nos.1 and 2 and contested the admission of the CP from the date of receipt of notice and till the CP was admitted on 27.07.2018. Hence, respondent Nos.1 and 2 cannot claim ignorance or no knowledge of the admission of the CP on 27.07.2018. It is not disputed by any of the respondents that the subject payments were made towards the services rendered or goods supplied before the date of admission of the CP i.e. prior to the date of initiation of CIRP proceedings against the corporate debtor-company - It is also not in dispute that from the date of initiation of CIRP and appointment of Interim Resolution Professional, the powers of the Board of Directors or the partners of the corporate debtor, as the case may be, shall stand suspended and be exercised by the Interim Resolution Professional. Since, admittedly, the subject transactions were made in respect of the services rendered or goods supplied prior to the initiation of CIRP, the same cannot be allowed to be sustained and the persons responsible for the said violation are liable to be proceeded with under Section 74 of the Code. However, taking a lenient view, we grant time to refund the money involved in the said transactions. Application is allowed with the following directions: - i.) Respondent Nos.1 to 4 are hereby directed to refund the money to the account of the corporate debtor, which has been received by them, within 30 days from the date of lifting of lockdown in the State of Punjab, imposed due to pandemic COVID-19 ii.) If Respondent Nos.1 to 4 failed to refund the money to the account of the corporate debtor within the above referred period, they are liable to refund the same with 12% interest p.a. from the date of the respective transactions till the date of actual refund and that the Resolution Professional shall take appropriate steps in terms of Section 74 of the Code.

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• Service Tax

• 2020 (9) TMI 435
  Refund of accumulated credit - ascertainment of eligible refund amount in terms of the formula prescribed in Rule 5 of the Credit Rules - input services availed for export of services - period from April 2012 to June 2012 - HELD THAT:- n the instant case, the lower authority has allowed refund of Rs. 4,73,929/- and rejected the balance refund of Rs. 3,47,183/-. While arriving at the total turnover, they have taken the aggregate of the value of export invoices for which payment has been received (Rs. 6,79,78,169/-) and the value of export invoices for which payment has not been received in the relevant period (Rs. 4,62,61,441/-), i.e. total Rs. 11,42,39,610/- in the denominator, whereas, in the numerator, they have considered Rs. 6,79,78,169/- i.e. the value of export services. In both the numerator and denominator, the amount of export turnover have to be considered i.e. Rs. 6,79,78,169/- when there is no domestic services rendered by the assessee appellant inasmuch as the value of all other services would be NIL in the given case. There is no reason to consider the aggregate of the value of export turnover payment of which has been received and those for which payment has not been received, since not required in the prescribed formula - When the value of export services has been considered for which payment has been received, in that case the refund is automatically allowed to that extent and therefore, there is no further need to add the value for which payment has not been received since not required as per the formula. The refund claim of Rs. 3,47,183/- is admissible. - Appeal allowed - decided in favor of appellant.

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• 2020 (9) TMI 434
  Refund of Service Tax - Club or Association Service - principles of Unjust Enrichment - Section 11B of the Central Excise Act, 1944 - HELD THAT:- A refund could be granted if the conditions laid down under Section 11B are satisfied and the primary condition is the principle of unjust enrichment. This test the appellant is unable to clear since the appellant is nowhere disputing the fact that it had passed on the duty element to its customers. There has also been an admission that as and when the refund is obtained, the duty element collected from its customers would be paid back. By this safe play, the appellant has ensured itself no loss since the same has been recovered and it has come in appeal by taking a chance. The fact that the appellant has passed on the tax element to its service recipient, the refund of which is not made as on date, coupled with the appellant s claim for refund of tax clearly attracts the principles of unjust enrichment and hence cannot be entertained. The lower authority has therefore rightly rejected which action does not call for any interference. Appeal dismissed - decided against appellant.

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• 2020 (9) TMI 433
  Club and Association Service - Meaning of club or association - Body of Persons - demand of service tax under the category of club or association services and business exhibition service on various heads of income broadly categorized under sponsorship from members for seminars and workshops, sale of publications, grants received from Government and European Commission and miscellaneous receipts - periods involved in the two show cause notices are from April, 2007 to March, 2012 and April 2012 to March, 2013 - HELD THAT:- The taxable service under section 65(105) (zzze) of the Act has also been amended by adding the expression or any other person after the expression to its members thus widening the tax net to include non-members of club or association as well - With effect from July 1, 2012, service has been defined under section 65B (44) of the Act and service tax is leviable on all services as defined except the negative list of services set out in section 66D of the Act. The club or association was earlier defined under section 65(25a) and 65(25aa) to mean any person or body or persons providing service. The expression body of persons cannot be possibly include persons who are incorporated entities, as such entities have been expressly excluded under sections 65(25a)(i) and 65(25aa)(i) as any body established or constituted by or under any law for the time being in force . Body of persons , therefore, would not include a body constituted under any law for the time being in force. Thus, companies and cooperative societies, prior to July 1, 2012, which were registered under respective Acts, would be constituted under those Acts. Incorporated clubs or associations, therefore, prior to July 1, 2012 which were registered under Acts, would be constituted under those Acts. Incorporated clubs or associations, therefore, prior to July 1, 2012 were not included in the service tax net. After July 1, 2012, also the situation does not change for the reason that Explanation 3 uses the same expression. It is not in dispute that in the present case the respondent has been incorporated under the provisions of the Societies Registration Act. Thus, even if the receipts under club or association services rendered by the Respondent are counted as income of the Respondent, even then the same cannot be taxed and the Appeal is liable to be dismissed on this ground alone. Appeal dismissed - decided against Revenue.

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• 2020 (9) TMI 432
  Principles of Estoppel - levy of service tax in respect of payments of salary to expats - Nature of transaction between Appellant and its Parent Company - Deduction of TDS by the Appellant from remuneration paid - employer-employee relationship or not - Demand of service tax alongwith interest and penalties - receipt of services from Canon Inc. Japan (Foreign Company) - reverse charge mechanism - period 01.04.2015 to 30.06.2017 - Difference of Opinion - Matter referred to Third Member. HELD THAT:- In view of the difference in opinion as stated in the order of proposed by the learned brother Member (Judicial) matter is referred to the Hon ble President for resolving the difference between the two members of the bench - Following question is proposed for reference to third member: i. Whether in view of the para 4.17 of the order proposed by Member (Technical), Member (Judicial) is correct in making the observation to effect that the decision of Delhi Bench which as per him are contrary to the view being taken in this case have not been considered in the order proposed by Member (technical) ii. Whether in view of the observations made by Member (Judicial) matter needs to be referred to larger bench or in view of para 4.17 of the order proposed by the Member (Technical) appeal needs to be dismissed.

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• Central Excise

• 2020 (9) TMI 431
  CENVAT Credit - inputs - M.S. Plates used in fabrication of final products as well as for platforms used as accessory to capital goods - applicability of restriction introduced in Explanation to Rule 2(k) for the relevant period of June, 2007 - HELD THAT:- The appellants have used the MS Plates both as inputs for fabrication of machinery, which is their final product liable to duty and have also used the MS Plates as Steel Platform for fabrication of their finished product being machinery. Thus, the MS Plates used in steel platform are also admittedly used in the factory of production. Rule 2(k) of CCR defines, inputs as all goods used in the factory by the manufacturer of the final product . Accordingly, the appellant is entitled to cenvat credit on MS Plates - appeal allowed - decided in favor of appellant.

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• Wealth tax

• 2020 (9) TMI 430
  Wealth Tax Liability - Whether Club can be treated as Association of Person ? - ITAT said No - HC said Yes - What is the meaning of the expression association of persons which occurs in Section 21AA? - Whether Bangalore Club is an association of persons and not the creation, by a person who is otherwise assessable, of one among a large number of associations of persons without defining the shares of the members so as to escape tax liability? - HELD THAT:- For the first time from 1st April, 1981, an association of persons other than a company or cooperative society has been brought into the tax net so far as wealth tax is concerned with the rider that the individual shares of the members of such association in the income or assets or both on the date of its formation or at any time thereafter must be indeterminate or unknown. It is only then that the section gets attracted. After 1st April, 2002, as income tax is concerned. It is well-settled that when Parliament used the expression association of persons in Section 21AA of the Wealth Tax Act, it must be presumed to know that this expression had been the subject matter of comment in a cognate allied legislation, namely, the Income Tax Act, as referring to persons banding together for a common purpose, being a business purpose in the context of a taxation statute in order to earn income or profits. In order to be an association of persons attracting Section 21AA of the Wealth Tax Act, it is necessary that persons band together with some business or commercial object in view in order to make income or profits. The presumption gets strengthened by the language of Sec. 21AA (2), which speaks of a business or profession carried on by an association of persons which then gets discontinued or dissolved. The thrust of the provision therefore, is to rope in associations of persons whose common object is a business or professional object, namely, to earn income or profits. Bangalore Club being a social club whose objects have been referred to by the Appellate Tribunal in this case make it clear that persons who are banded together do not band together for any business purpose or commercial purpose in order to make income or profits. Whether the club has been created to escape tax liability - Held that:- A perusal of the judgment in ELLIS BRIDGE GYMKHANA AND OTHERS [ 1997 (10) TMI 2 - SUPREME COURT] would show that Section 21AA has been introduced in order to prevent tax evasion. The reason why it was enacted was not to rope in association of persons per se as one more taxable person to whom the Act would apply. The object was to rope in certain assessees who have resorted to the creation of a large number of association of persons without specifically defining the shares of the members of such associations of persons so as to evade tax. In construing Section 21AA, it is important to have regard to this object. The Bangalore Club is an association of persons and not the creation, by a person who is otherwise assessable, of one among a large number of associations of persons without defining the shares of the members so as to escape tax liability. - It is clear that Section 21AA of the Wealth Tax Act does not get attracted to the facts of the present case. Charging provisions under the Income Tax versus under the Wealth Tax - Held that:- For all the reasons, we cannot accede to Shri Banerjee s argument that being taxed as an association of persons under the Income Tax Act, the Bangalore Club must be regarded to be an association of persons for the purpose of a tax evasion provision in the Wealth Tax Act as opposed to a charging provision in the Income Tax Act. Effect of Dissolution / liquidation clause as per section 21AA(2) - Held that:- What has to be seen in the facts of the present case is the list of members on the date of liquidation as per Rule 35 cited hereinabove. Given that as on that particular date, there would be a fixed list of members belonging to the various classes mentioned in the rules, it is clear that, applying the ratio of Trustees of H.E.H. Nizam s Family [ 1977 (5) TMI 1 - SUPREME COURT] such list of members not being a fluctuating body, but a fixed body as on the date of liquidation would again make the members determinate as a result of which, Sec. 21AA would have no application.

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